BitConnect Facing Lawsuits for Defrauding Investors

Scams and other accounts of shady activity have made people hesitant to get involved in cryptocurrency. But those who have fallen victim to a cryptocurrency scam will be glad to know that BitConnect is racking up the lawsuits for their investment scheme. Many in the cryptocurrency community have accused BitConnect, a platform for lending and exchanging decentralized cryptocurrency, of running a Ponzi scheme.

BitConnect Coin (BCC), a token not to be confused with Bitcoin Cash, powered the BitConnect platform. The platform was anonymously run, encouraging users to loan their cryptocurrencies to the company in exchange for returns on their investment. The platform also had a multi-level referral feature. This encouraged users to lure in additional sign-ups in an aggressive marketing strategy known as a pyramid scheme.

Promises of Fixed Returns

The idea behind BitConnect of profitting from market fluctuations is commonly used as a trading strategy. However, their guaranteed returns and hefty promises caused many to flag the operation as a Ponzi scheme. For example, BitConnect claimed that it would provide a 3,000% return on a year-long investment or 40% monthly. People suspected that the company was paying out loan interest to investors with the money they received from new loans.

BitConnect users were required to make loans in BitConnect Coin (BCC). This meant they had to exchange their bitcoin for BCC on the platform. They would receive their payout in BCC as well, which they could then convert back to bitcoin and USD if desired. The fact that BCC was required for people to participate caused the demand and price of BCC to spike from less than a dollar to about $430 within a year.

BitConnect Announces Shut-Down

BitConnect abruptly announced that it was shutting down its trading platform in mid-January. They claim this shut-down was due to bad press, two Cease and Desist letters which got in the way of legal operations, and continuous DDoS attacks on their platform. In their announcement, they also claimed that BitConnect Coin can still be traded in outside exchanges. However, the shutdown caused the price of BCC to plummet. Now, investors are left holding the essentially useless tokens which are worth about $2.37 today.

Victims Now Filing Lawsuits

As a result, BitConnect has been slapped with four lawsuits targeted at the project and its parent companies. The first of which was filed in Florida by several victims of the scheme who lost a combined $771,000. This lawsuit mentions BitConnect itself, as well as five people who were involved in promoting the scheme on YouTube.

Another of these lawsuits comes from a Minnesotan resident, Patricia Mengesha, whose $12,770 investment deflated to a few hundred dollars. The lawsuit claims that hundreds of thousands of Americans lost money in the scheme.

Just prior, a lawsuit had been filed by Paul Long and Kiandra Love targeting Ryan Maasen, a BitConnect promotor on YouTube. An additional a class-action lawsuit was filed against BitConnect at the end of January. This lawsuit also targets Ryan Maasen for promoting the Ponzi scheme. Specifically, the lawsuit accuses BitConnect of scamming thousands of people in the state of Kentucky.